Appointment of Auditors
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Appointment of Auditors - An Overview
The appointment of an auditor offers manifold advantages for the company. The auditor acts as a vigilant caretaker and ensures compliance with regulatory requirements. Companies registered under the Companies Act are mandated to appoint an auditor annually to audit their books of accounts.
Powers of Auditor
Rights of TrueConnect:
- Right of access to Books of account & Vouchers [Sec. 143(1)]
- Right to obtain information & explanation [Sec. 143(1)]
- Right to visit branch offices & access branch accounts
- Right to receive notice & attend general meetings
- Right to make representations
- Right to report to members
- Right to sign the audit report
- Right to seek the opinion of an expert
- Right to receive remuneration
Duties of Auditor
Duties of TrueConnect:
- Reporting to members [Sec. 143(2)]
- Examination of accounts
- Reporting on true & fair view
- Duty as to Enquiry [Sec. 143(1)]
- Reporting on additional matters
- Duty to sign the report
- Duty to provide statutory reports
- Duty regarding prospectuses [Sec. 56]
- Duty to assist investigations
Why Should an Auditor Be Appointed
Auditors verify that business processes adhere to documented policies and procedures. They provide objective insights into business entities. Their recommendations and suggestions enable businessmen to enhance operational efficiency. Scrutiny and analysis of various business assets allow auditors to assess risks and protect assets.
Section 141 of the Companies Act, 2013 specifies eligibility, qualifications, and disqualifications for auditors:
- The person must be a Chartered Accountant; a firm must have a majority of partners practicing in India.
- Only a CA partner can sign reports on behalf of an audit firm.
- LLPs and certain other entities cannot be appointed as auditors.
- Employees, officers, or those with business relationships with the company are ineligible.
- Non-government companies appoint subsequent auditors in the first AGM under Section 139(1), serving until the 6th AGM.
- Government companies’ auditors are appointed by the C&AG within 180 days of the financial year start, until the next AGM.
- MGT-14 with board resolution (private companies exempt under Section 179(3)).
- Form ADT-1 with auditor details.
- Only practicing CAs can be company auditors, with written consent and appointment certificate required.
- Listed companies and others meeting specific criteria limit auditor terms.
- Filled promptly by the C&AG for government companies and by the board for others, ratified by members.
FAQs
Yes, as per the provisions of the Companies Act, 2013, every company needs to appoint an auditor.
Section 139 mandates the appointment of a statutory auditor for the company.
- Internal Audit
- External Audit
- Financial Audit
- Information Technology Audit
- Statutory Audit
Form ADT-1 is used by a company to inform the Registrar of Companies about the appointment of an auditor after its Annual General Meeting (AGM). It should be filed within 15 days from the meeting where the auditor was appointed.
Auditors are appointed by the shareholders of the company to audit and issue reports to them.
